Monday, May 30, 2016

Pipelines, Platforms, and the New Rules of Strategy

Marshall W. Van Alstyne
Geoffrey G. Parker
Sangeet Paul Choudary

An absolutely must read article

For decades, the five-forces model of competition has dominated the thinking about strategy. But it describes competition among traditional “pipeline” businesses, which succeed by optimizing the activities in their value chains—most of which they own or control. “Platform” businesses that bring together consumers and producers, as Uber, Alibaba, and Airbnb do, require a different approach to strategy.  
The critical asset of a platform is external—the community of members. The focus shifts from controlling resources to orchestrating them, and firms win by facilitating more external interactions and creating “network effects” that increase the value provided to all participants. 
In this new world, competition can emerge from seemingly unrelated industries and even from within the platform itself....
..... Businesses that fail to learn the new rules will struggle.... When a platform enters the marketplace of a pure pipeline business, the platform nearly always wins. That’s exactly what happened when the iPhone came on the scene in 2007. By 2015, it accounted for 92% of global profits in mobile phones, while most of the giants that once ruled the industry made no profit at all.....
.....Platforms have existed for years. Malls link consumers and merchants; newspapers connect subscribers and advertisers. What’s changed in this century is that information technology has profoundly reduced the need to own physical infrastructure and assets. IT makes building and scaling up platforms vastly simpler and cheaper, allows nearly frictionless participation that strengthens network effects, and enhances the ability to capture, analyze, and exchange huge amounts of data that increase the platform’s value to all.
You don’t need to look far to see examples of platform businesses, from Uber to Alibaba to Airbnb, whose spectacular growth abruptly upended their industries.
Though they come in many varieties, platforms all have an ecosystem with the same basic structure, comprising four types of players. The owners of platforms control their intellectual property and governance. Providers serve as the platforms’ interface with users. Producers create their offerings, and consumers use those offerings.

Monday, May 23, 2016

Increase Your Return on Failure

Julian Birkinshaw
Martine Haas

The article offers great insight on the major barrier to growth—fear of failure.

One of the most important—and most deeply entrenched—reasons why established companies struggle to grow is fear of failure. Indeed, in a 2015 Boston Consulting Group survey, 31% of respondents identified a risk-averse culture as a key obstacle to innovation…… management processes for budgeting, resource allocation, and risk control are built on predictability and efficiency, and executives get promoted by showing they’re in control. So even if people understand that they can and should fail, they do everything possible to avoid it. 

But there’s a way to resolve this conundrum: Rigorously extract value from failure, so you can measure—and improve—your return on it, boosting benefits while controlling costs….

… In a return on failure ratio, the denominator is the resources you’ve invested in the activity. One way to raise your return is by reducing this number—by keeping your investments low. Or you can deliberately sequence them, starting with small amounts, until major uncertainties have been resolved. The numerator is the “assets” you gain from the experience, including information you gather about customers and markets, yourself and your team, and your operations. Increasing these is the other way to boost your return.
There are three steps you can take to raise your organization’s return: First, study individual projects that did not pan out and gather as many insights as possible from them. Second, crystallize those insights and spread them across the organization. Third, do a corporate-level survey to make sure that your overall approach to failure is yielding all the benefits it should. 

Step 1: Learn from Every FailureBegin by getting people to reflect on projects or initiatives that disappointed
Step 2: Share the LessonsWhile it’s useful to reflect on individual failures, the real payoff comes when you spread the lessons across the organization 
Step 3: Review Your Pattern of FailureThe third step is to take a bird’s-eye view of the organization and ask whether your overall approach to failure is working

Monday, May 16, 2016

A Strategist’s Guide to the Internet of Things

The digital interconnection of billions of devices is today’s most dynamic business opportunity.
by Frank Burkitt

Internet of Things represent a new horizon for everyone and should be part of your ideation efforts

Humanity has arrived at a critical threshold in the evolution of computing. By 2020, an estimated 50 billion devices around the globe will be connected to the Internet. Perhaps a third of them will be computers, smartphones, tablets, and TVs. The remaining two-thirds will be other kinds of “things”: sensors, actuators, and newly invented intelligent devices that monitor, control, analyze, and optimize our world. 
This seemingly sudden trend has been decades in the making, but is just now hitting a tipping point. The arrival of the “Internet of Things” (IoT) represents a transformative shift for the economy, similar to the introduction of the PC itself. It incorporates other major technology industry trends such as cloud computing, data analytics, and mobile communications, but goes beyond them. Unlike earlier efforts to track and control large systems, such as radio-frequency identification (RFID), the Internet connection gives this shift almost limitless versatility. 
The IoT also opens a range of new business opportunities for a variety of players. These opportunities tend to fall into three broad strategic categories, each reflecting a different type of enterprise: “Enablers” that develop and implement the underlying technology “Engagers” that design, create, integrate, and deliver IoT services to customers “Enhancers” that devise their own value-added services, on top of the services provided by Engagers, that are unique to the Internet of ThingsAt present, the Internet of Things remains a wide-open playing field for enterprises. It’s young, heterogeneous, and full of uncertainty. Estimates of potential economic impact by 2020 (as tracked by the Postscapes information service) range from about US$2 trillion to more than $14 trillion. Companies small and large, old and new, are scrambling to stake out their territory.

Current examples include (go to the article for a discussion of this table):

Thursday, May 12, 2016

Agility: It rhymes with stability

By Wouter Aghina, Aaron De Smet, and Kirsten Weerda

Companies can become more agile by designing their organizations both to drive speed and create stability.

Innovation driven growth is often driven by balancing opposing forces: short vs. long term; freedom vs. control; etc.. This great article discusses the all important balance between agility and stability.

Why do established companies struggle to become more agile? No small part of the difficulty comes from a false trade-off: the assumption by executives that they must choose between much-needed speed and flexibility, on the one hand, and the stability and scale inherent in fixed organizational structures and processes, on the other. 
Start-ups, for example, are notoriously well known for acting quickly, but once they grow beyond a certain point they struggle to maintain that early momentum. Equally, large and established companies often become bureaucratic because the rules, policies, and management layers developed to capture economies of scale ultimately hamper their ability to move fast. 
In our experience, truly agile organizations, paradoxically, learn to be both stable (resilient, reliable, and efficient) and dynamic (fast, nimble, and adaptive). To master this paradox, companies must design structures, governance arrangements, and processes with a relatively unchanging set of core elements—a fixed backbone. At the same time, they must also create looser, more dynamic elements that can be adapted quickly to new challenges and opportunities. 
This is an interesting worksheet to start your effort to deal with this balance. I strongly urge you read the full article!!!!